Arizona Debt Management Bond: A Comprehensive Guide
This guide provides information for insurance agents to help Debt Managers obtain Arizona Debt Management Bonds
At a Glance:
- Lowest Cost: $100 per year or $10 per month based on the debt manager’s credit
- Bond Amount: Based on the debt manager’s number of yearly disbursements:
Table 1.1
| Gross Income | Bond Amount |
|---|---|
| Less than $100,000 | $5,000 |
| $100,000 to $250,000 | $10,000 |
| $250,001 to $500,000 | $15,000 |
| $500,001 to $1 million | $20,000 |
| More than $1 million | $25,000 |
- Who Needs It: All individuals and business entities seeking to obtain a debt management license in the State of Arizona
- Purpose: To ensure the public will receive compensation for any damages should the debt manager fail to comply with licensing law
- Who Regulates Debt Managers in Arizona: The Arizona Department of Insurance and Financial Institutions
Background
Arizona Statute 6-703 requires debt managers operating in the state to obtain a license with the Department of Insurance and Financial Institutions. The Arizona legislature enacted the licensing laws and regulations to ensure that debt managers engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, debt managers must purchase and maintain a debt management surety bond (limits outlined in Table 1.1) to be eligible for licensure.
What is the Purpose of the Arizona Debt Management Surety Bond?
Arizona requires debt managers to purchase a surety bond as part of the application process to obtain a debt management license. The bond ensures that the public will receive compensation for financial harm if the debt manager fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the debt manager breaks licensing laws.
How Can an Insurance Agent Obtain an Arizona Debt Management Surety Bond?
BondExchange makes obtaining an Arizona Debt Management Bond easy. Simply login to your account and use our keyword search to find the “debt” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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Is a Credit Check Required for the Arizona Debt Management Bond?
Surety companies will run a credit check on the debt manger to determine eligibility and pricing for the Arizona Debt Management bond. Managers with excellent credit and work experience can expect to receive the best rates. Managers with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the manager’s credit.
How Much Does the Arizona Debt Management Bond Cost?
The Arizona Debt Management surety bond can cost anywhere between 1% to 5% of the bond amount per year. Monthly subscription options are also available. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on the $20,000 bond requirement.
$20,000 Debt Management Surety Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $200 | $20 |
| 680 – 799 | $300 | $30 |
| 650 – 679 | $400 | $40 |
| 600 – 649 | $800 | $80 |
| 450 – 599 | $1,000 | $100 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Arizona Define “Debt Management Company”?
To paraphrase Arizona Statute 6-701, a debt management company is any business entity that receives money from an individual or entity and distributes the funds to the individual or entity’s creditors.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do Debt Management Companies Apply for a License in Arizona?
Debt Management Companies in Arizona must navigate several steps to secure their debt management license. Below are the general guidelines, but managers should refer to the licensing statutes for details on the process.
License Period – The Arizona Debt Management License expires on June 30 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the Arizona Debt Management License must first amass a company net worth (assets – liabilities) of at least $2,500 in liquid assets. Debt Management Companies must submit unaudited financial statements verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Debt Management companies must purchase and maintain a debt management surety bond (limits outlined in Table 1.1)
Step 3 – Request an NMLS Account
The Arizona Debt Management License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 4 – Complete the Application
All Arizona Debt Management License applications must be completed online through the NMLS. Applicants must complete entire the application, and submit the following items:
-
- Unaudited financial statements indicating a net worth of at least $2,500 in liquid assets
- The contact information for the responsible individual and the person responsible for handling consumer complaints
- FBI background check authorization
- A sample copy of a debt management agreement
Step 5 – Pay Fees
Applicants for the Arizona Debt Management License must pay the following fees when submitting their license application:
-
- $500 application fee
- $36.25 background check fee
- A licensing fee dependent on the month the license is issued:
Table 1.3
| Month the License is Issued | Licensing Fee |
|---|---|
| Jan, Feb, Mar | $250 |
| Apr, May, Jun | $625 |
| Jul, Aug, Sep | $500 |
| Oct, Nov, Dec | $375 |
How Do Arizona Debt Management Companies Renew Their License?
Debt management companies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Arizona Debt Management License expires on June 30 of each year and must be renewed before the expiration date
What Are the Insurance Requirements for the Arizona Debt Management License?
The State of Arizona does not require debt management companies to obtain any form of liability insurance as a prerequisite to obtaining a Debt Management License. Debt managers must purchase and maintain a debt management surety bond.
How Do Arizona Debt Management Companies File Their Bond?
Debt management companies should submit the completed bond form, including the power of attorney, electronically through the NMLS. The debt management surety bond requires signatures from both the surety company that issues the bond and the debt manager. The surety company should include the following information on the bond form:
- Legal name of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- License Type (debt management)
- Date the bond goes into effect
What Can Businesses Do to Avoid Claims Against the Arizona Debt Management Bond?
To avoid claims on the Debt Management Bond, debt management companies must transfer all collected funds to the appropriate parties.
What Other Insurance Products Can Agents Offer Debt Management Companies in Arizona?
Arizona does not require debt management companies to obtain any form of liability insurance. However, most reputable companies will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Arizona Debt Management Company Customers?
Arizona conveniently provides a public database to search for active debt management companies in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.